The need for speed at global ports

A few thoughts come to mind with this month’s release of our 2014 Port Productivity rankings, the third year of our report on global port and terminal productivity. Meeting in Asia this month with a number of carriers that participate in the project by submitting their berth productivity data to The Journal of Commerce, I’ve never seen a greater sense of urgency to find ways to get ships in and out of port faster. It’s a simple calculus: The quicker a ship leaves port, the slower the speed and less fuel is needed to get to the next port on schedule.

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Andy Lane of CTI Consultancy in Singapore spelled out what’s at stake to The Loadstar: If Maersk Line were able to reduce port stay time by 7 percent across its estimated 31,000 port calls annually — in other words, 1.3 hours out of a 13- to 18-hour port call — it could reduce fuel consumption by $120 million a year. Multiply those savings by the dozens of additional carriers, and the potential annual savings are well more than $1 billion.

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In an industry with more than $200 billion in annual revenue, that isn’t a lot. But carriers don’t have many options left to go after costs, which is why they continue to build mega-ships (container ships continue to increase in size whereas bulk and tankers peaked in size years ago), and why you’ll likely see increased joint procurement by carrier alliances such as the G6 and CKYHE to extract incremental cost savings.

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The requirement to limit sulfur emissions within Emission Control Areas off northern Europe and the U.S., which involves burning much more expensive low-sulfur fuel, is only adding to the urgency to pursue improvements in berth productivity. At a time when carriers are hemorrhaging cash in the Asia-Europe trade, where rates during the past year have plunged nearly 80 percent to a surreal $243 per TEU, carriers are desperate for cost savings. The more moves per hour achieved on a ship, the faster the vessel is on its way. It’s that simple.

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Improving productivity may benefit carriers by allowing them to cut fuel costs, but the benefits don’t end there. To design ships with greater capacity, marine architects are making them wider, not longer, limiting the number of cranes that can be put on a ship at any one time and extending the distance between the location of the container on the ship and the terminal pavement.

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Mega-ships are taking longer to load and offload, and they take up more berth space than smaller, earlier-generation ships.

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Among other issues, this is crowding out feeder ships and inhibiting the flow of transshipments at many ports, adding overall transit time to cargo. So, higher productivity benefits the port as well as the carrier, freeing up berth space that can be used to handle more ships, move more cargo and generate more revenue.

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Tension between carriers and terminals seems to be rising in this challenging environment. At last fall’s JOC Port Performance-Europe Conference in London, we presented a case study of terminal-carrier collaboration to reduce port stay time, involving OOCL and DP World-Southampton. It showed that if both parties put in the effort, port stay time could be reduced and both sides would come away satisfied.

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The more I dig into this, however, the more it seems this is the exception rather than the rule. Terminals are generally at loggerheads with carriers, with the latter wanting more cranes on the ship, immediate access to berths upon ship arrival (unless the ship arrives late), improved automation and, of course, lower prices to offset the plummeting rates carriers are experiencing on the commercial side.

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Carriers can and do squeeze terminals in highly competitive regions such as the Middle East but are powerless in places such as China where the ship lines have no choice but to serve major gateways such as Shanghai, Ningbo or Tianjin and where there is limited competition among terminals under the auspices of the port authority.

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We undertook the Port Productivity project in large part to stimulate a dialogue in the industry around the need to improve efficiency for everyone’s benefit — carriers, terminals and shippers.

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